Interesting Times in Telecoms

tadsummit sponsorsIts interesting times to review quarterly financial performance of a number of telecom companies. Firstly, examining the large established ones focused on telco:

  • Ericsson revenue fell 6% year over year during the third quarter to $5.9 billion
  • Nokia fell 9% year-on-year to around $5.7B in Q3, and said conditions will continue to be difficult into 2018.
  • Verizon reported service revenue of $15.8 billion during the quarter, down 5.1% year over year.
  • AT&T Revenue: $39.67 billion versus $40.89 billion in revenue in 2016, a 3% decline.
  • Huawei bucks this trend, thanks in part to its mobile phone division, first six months of 2017 came in at $42.04 billion, a 15% increase. Its not a fair comparison to the previous 4 solidly telco-focused businesses, as consumer electronics makes up significant part of the business.

Then looking at some of the “smaller” players focused on using programmable telecoms to shake up the established telco industry:

  • RingCentral total revenue of $129.8 mil (up 34% y/y)
  • Five9 Revenue of $50.1 mil, up 22.2% y/y
  • Vonage revenues of $253 million, a 2% increase from the year ago quarter. But the interesting thing is some of the details of their revenue restructuring. Vonage Business total revenues were $129 million, representing 51% of total consolidated revenues, with Nexmo making up $38M a 45% increase. Alan Masarek, Vonage CEO, discussed this shift last year at TADSummit. This is a large established business managing a significant shift in its business focus.
  • Twilio has total revenue of $100.5 mil (up 41% y/y). I think its now or close to the dominant SIP trunking provider in the US.

Its funny that we refer to $500M-$1B annual revenue businesses as “smaller” players. They’re big!

From my work with lots of start-ups in the programmable telecoms space, ones with revenues in the $10s of millions, its simply not a matter of competition between providers at the moment. Rather education and winning enterprise accounts. Hence why we’re seeing regionally focused players doing great business like Apifonica (European focus) and IdealMart (Sri Lanka focus).

On the outlook to 2018 and beyond. Ericsson and Nokia are cutting costs and hoping 5G generates similar revenues to 4G. With maintenance, managed services, BOSS, IP routing keeping the revenues ticking over. AT&T looks to expand into the content creation business with the acquisition of Time Warner. While VZ and AT&T national enterprise revenues appear to continue their decline, but that number of not simply broken out anymore in their results, it gets lumped into wireline, which is in decline despite FiOS growth. Definitely in the SME and mid-market enterprise there is decline given the rapid growth across from all the “smaller” service providers.

The outlook from the smaller service providers is also starkly different, its about managing growth and margins. Numbers speak louder than words, the shift in value creation is underway. Now, what does the future hold for programmable telecoms? Check out TADSummit next week to understand. TADSummit is made possible thanks to the sponsorship of: ApifonicaDataArtKandy / Ribbon CommunicationsTelestaxTemasysTyntecVoIP InnovationsWazo. And partners including ApidazeCap GeminiLocatrixPartitionwareProtocol LabsTelet ResearchVUC, and many more….